Earnings reports
How to read a quarterly report.
Four times a year, every company listed on a stock exchange publishes its results. Learn which figures to look at, why the price can jump and how to look after your risk on those days.
What it is
A quarterly exam for the company
Listed companies publish every quarter how much they sold, how much they earned and what they expect from the next one. That document is called an earnings report.
It is not about knowing whether the company "did well". The price already contains what the market expected. What moves the price is the difference between what was expected and what was published.
The figures
Six things worth identifying
With these six you can already read the headline of any report.
Revenue
What the company sold in the quarter. It is compared with the same quarter of the previous year and with what the market expected.
Earnings per share (EPS)
Profit divided by the number of shares. It is the figure most quoted in headlines.
Margins
What part of each sale is left as profit. Falling margins with rising revenue can worry people more than weak revenue.
Guidance
What the company expects for the next quarter or the year. It often weighs more than past results.
Consensus expectations
The average of what analysts estimated. A company "beats" or "misses" against that number, not against zero.
Management commentary
On the call with analysts the company explains the numbers. The tone can change how the same data is read.
The price
Why the price can jump
A report is usually published before the open or after the close of the exchange. That is why the price can open far from the previous close: that is a gap.
Good numbers, lower price
It happens when the results are good but below what the market expected, or when guidance disappoints.
More volatility around the report
The range of movement tends to be larger that day and the next than on a normal day.
The first reaction does not always hold
Sometimes the price moves one way and reverses hours or days later. It is another reason not to trade the headline.
Risk
Position size on report days
- A stop is not guaranteed to fill at the stated price if the price opens with a gap.
- A CFD's leverage magnifies gaps: what looks like a small risk can be much larger.
- The stock's trading hours and the costs of trading can vary; check them on hfm.com.
- A study rule: on demo, practice with a smaller size or without trading on report day.
A routine
Before, during and after
- 01
Before
Find the date on the company's investor-relations site. Note the revenue and EPS consensus, and mark your levels.
- 02
During
Read the headline and compare it with the consensus. Then review the guidance and the price reaction. Do not try to trade the first minute.
- 03
After
Write in your journal what the market expected, what happened and how the price reacted. That is what you study.
Examples
Three companies to practice reading
HFM lists them as stock CFDs. Each guide explains what the market tends to look at in that company.
Tesla
An electric car maker that also sells energy storage and software. HFM lists it as a stock CFD.
Open guide →Amazon
E-commerce, cloud services, advertising and streaming. HFM lists it as a stock CFD.
Open guide →NVIDIA
Designs graphics processors and chips for artificial intelligence and data centers. HFM lists it as a stock CFD.
Open guide →
Naming a company is not a recommendation to buy or sell. Report dates are announced by each company on its investor site; they are not published here so as not to show an outdated date.
Frequently asked questions
What everyone asks
Is it a good idea to trade right when the report comes out?
Arco does not give trade recommendations. What it does teach is that this moment has more volatility and price gaps, so it calls for extra care with size and with the stop.
What is the consensus?
The average of what analysts estimated for revenue and EPS. Results are compared with that number.
Why does good news make the price fall?
Because the price already included an expectation. If the result is good but lower, or guidance disappoints, the price can fall.
Where do I see the report date?
On each company's investor-relations site. Arco does not publish dates so as not to show outdated data.
Learn to read them calmly.
A report is a day of extra volatility that you study on demo first.